NZD/USD seesaws near 3-week high in a search of fresh clues

• NZD/USD shows less reaction to the weekend’s China trade data.
• Optimism surrounding US-China trade meeting, weaker USD helps the Kiwi.
• New Zealand’s second quarter (Q2) Manufacturing Sales to decorate economic calendar.

Having been the top G10 performer on Friday, NZD/USD awaits fresh clues to extend its latest recovery as it takes the rounds to 0.6418 at the start of Monday’s Asian session.

In spite of no major boost from New Zealand, the Kiwi pair managed to outperform its major counterparts as expectations of the US-China trade negotiations in October, coupled with a late-September US visit by Chinese deputies, joined downbeat Nonfarm Payrolls data from the US.

During the weekend, China released its August month trade data. While the headline Trade Balance lagged well behind $43.00B to $34.84B, Exports (YoY) slumped -1.0% versus an expected rise of 2.0% while Imports weakened to -5.6% from -6.0% forecast. It should also be noted that the dragon nation’s exports to the US fed 16% YoY following a 6.5% drop in July while the imports from the US weakened 20% on a yearly basis.

While the current week has fewer catalysts from New Zealand, the Australia and New Zealand Banking Group (ANZ) holds its bearish bias towards 0.25% Official Cash Rate (OCR) by the end of 2020. They offer seven reasons supporting their expectations, such as “near-term growth indicators are inconsistent with RBNZ projections, inflation expectations are slipping, our Australian colleagues foresee similar cuts by the RBA which will put pressure on NZ financial conditions, a softer global growth environment, the labour market outlook, the RBNZ bank capital proposals (the May cut is a placeholder until we know the details – not that we can add many more cuts in when we do), and the deteriorating outlook for the dairy sector.”

Moving on, we have no major data on offer during the day, except Q2 Manufacturing Sales from New Zealand that grew 2.0% in the Q1 2019. As a result, investors will keep focusing on trade headlines and offshore events for fresh impulse.

Technical Analysis

50-day exponential moving average (EMA) surrounding 0.6480 and August 09 top, close to 0.6500, appear near-term strong resistances for the pair to cross in order to justify its strength in targeting August month high of 0.6490, failing to do the same could drag the pair back to 21-day EMA level of 0.6406 whereas 0.6360 and 0.6330 can entertain sellers afterward.